In today’s knowledge-driven economy, intangible assets—such as intellectual property, brand reputation, customer relationships, and human capital—are increasingly becoming more valuable to organisations than tangible assets like physical infrastructure, machinery, or inventory. This shift reflects the changing nature of business value creation, where the competitive advantage is often derived from the unique, non-physical assets that companies possess.
Ocean Tomo survey in its Intangible Asset Market Value Study shows the accelerated shift to intangible assets. Ref: https://global.lockton.com/news-insights/the-accelerated-shift-to-intangible-assets-and-how-to-protect-them
Here are some examples showing this trend and illustrating how intangible assets are reshaping the value of organisations.
1. Intellectual Property (IP) and Technology
Importance of Intellectual Property: Intellectual property, including patents, trademarks, copyrights, and trade secrets, represents a significant portion of the value for many modern companies, particularly in the technology sector. These intangible assets are often the primary source of competitive advantage and profitability.
Example: Apple Inc.: Apple’s brand value and its portfolio of patents and trademarks are critical to its market dominance. While Apple’s tangible assets like factories and retail stores are valuable, the true worth of the company lies in its design patents, software ecosystems (like iOS), and its brand reputation. In 2023, Apple was valued at over $2 trillion, with a substantial portion of this value attributed to its intangible assets. The company’s innovative products and the loyalty they inspire are rooted in these intangible assets, rather than in the physical products themselves. (Ref: Interbrand (2023). Best Global Brands 2023 )
2. Brand Value and Reputation
Importance of Brand Value: A strong brand can significantly enhance a company’s market position, allowing it to command premium prices, attract loyal customers, and enter new markets more easily. Brand value is an intangible asset that is built over time through consistent quality, effective marketing, and customer trust.
Example: Coca-Cola: Coca-Cola’s brand is one of the most recognized in the world, and it is a key driver of the company’s value. While Coca-Cola’s tangible assets include its bottling plants and distribution networks, its brand name, logo, and the consumer loyalty they inspire are what truly set the company apart. In fact, the brand alone is estimated to be worth more than $80 billion, underscoring the importance of intangible assets to the company’s overall value. (Ref: Forbes (2023). The World’s Most Valuable Brands 2023)
3. Human Capital and Knowledge
Importance of Human Capital: Human capital—an organization’s collective skills, knowledge, and expertise—has become a critical intangible asset, particularly in industries like technology, finance, and consulting. Companies that invest in developing their employees’ capabilities often find themselves at a competitive advantage.
Example: Google (Alphabet Inc.): Google’s value is heavily derived from its human capital—the talent and expertise of its engineers, developers, and researchers. The innovative products and services that have made Google a global leader are largely a result of the intellectual capabilities of its workforce. Unlike tangible assets, which can depreciate over time, human capital can grow and increase in value, contributing to sustained innovation and competitive advantage. (Ref: Harvard Business Review (2018). The Value of Human Capital and Employee Engagement. HBR.)
4. Customer Relationships and Networks
Importance of Customer Relationships: In many businesses, especially those in the service sector, the value of customer relationships can surpass that of physical assets. Loyal customers, strong business networks, and positive customer experiences are powerful intangible assets that drive repeat business and long-term profitability.
Example: Amazon: Amazon’s vast customer base and its ability to collect and analyse customer data are among its most valuable intangible assets. While Amazon does possess extensive physical infrastructure, including warehouses and delivery networks, its true competitive edge lies in its deep understanding of customer behaviour, its vast network of third-party sellers, and the trust it has built with millions of customers globally. This intangible value is reflected in Amazon’s market capitalization, which significantly exceeds the book value of its tangible assets. (Ref: McKinsey & Company (2020). Customer Experience: New Capabilities, New Audiences, New Opportunities.)
5. Data and Digital Platforms
Importance of Data: In the digital age, data has become one of the most valuable intangible assets. Organisations that can effectively collect, analyse, and leverage data to make informed decisions, personalize customer experiences, and drive innovation are often those that lead their industries.
Example: Facebook (Meta Platforms Inc.): Facebook’s value is deeply tied to its data assets. The platform’s ability to collect vast amounts of user data and leverage this information to create targeted advertising campaigns is a key component of its business model. While Facebook’s tangible assets, such as its servers and offices, are important, the value of the data it holds and its platform’s network effects far outweigh these physical assets. (Ref: The Economist (2017). The World’s Most Valuable Resource Is No Longer Oil, but Data. Retrieved from The Economist.)
Conclusion
The shift from tangible to intangible assets as the primary drivers of value reflects the broader transformation of the global economy. In a world where knowledge, innovation, brand strength, and customer relationships are increasingly critical, intangible assets often outweigh the physical assets on an organization’s balance sheet. Companies like Apple, Coca-Cola, Google, Amazon, and Facebook exemplify how intangible assets—intellectual property, brand value, human capital, customer networks, and data—can create significant and sustainable value. As the economy continues to evolve, the importance of these intangible assets will only grow, making them central to the success and valuation of organisations across industries